Posts Tagged Pure Advantage

As expected, the New Zealand government’s response to the IPCC’s Working Group 3 report on mitigating climate change pays lip service to the science, while maintaining that NZ is doing all that can be expected. Climate change minister Tim Groser’s press release said that the IPCC report’s call for intentional cooperation meant that NZ is “on the right track in pressing for a binding international agreement on emissions beyond 2020″ but failed to note the urgency explicit in the report.

Groser also repeated the government’s standard response when challenged on government inaction on climate policy:

“New Zealand is doing its fair share on climate change, taking into account our unique national circumstances, both to restrict our own emissions and support the global efforts needed to make the cuts that will limit warming.”

Groser’s response to the WG2 and WG3 reports so angered Pure Advantage founder Phillip Mills that he announced he would make a $125,000 donation to the Labour and Green parties. Mills, who has been working behind the scenes for the last five years, lobbying cabinet ministers and National MPs to build a business case for climate action and clean, green business growth, told the NZ Herald:

I’ve been trying impartially to deal with National. I’ve met with John Key around this a number of times … and really I held the hope that I and groups that I’ve been involved with would be able to get National to see sense.

…each New Zealander is responsible for emitting around eight tonnes of carbon dioxide a year … we are now the fourth highest emitters per person in the world, behind Australia, the United States, and Canada. New Zealand has set a modest target to reduce our total greenhouse gas emissions by five per cent below the 1990 gross emission level in just six years time, yet no one knows how we will achieve this…

in international climate change negotiations NZ is regarded as a particularly ‘tough’ negotiator. By ‘tough’ read ‘selfish’. … To get global buy-in NZ must act as a global leader in emissions reductions not a selfish backwater.

There aren’t any responsible leaders, competent engineers, or sensible people who would suggest we should exceed safety limits. Who in the world would say that as a matter of convenience, we should push essential systems to collapse? There is also no way to mitigate the impacts of a catastrophic failure.

The only option now is for all responsible, competent and sensible people to demand action from engineers, planners and business leaders to change every system that produces and uses climate affecting materials so dramatically reduce the production and use of fossil fuels and reduce the emissions of other greenhouse gasses.

Tasked with these comments by Green climate spokesman Kennedy Graham, Groser’s response was the scientists should “stick to their knitting” and leave the decision-making to him. Such obvious contempt for expertise seems to be a hallmark of Groser and his colleagues: when the message is inconvenient, how much easier to belittle the messenger than to address the issue.

That’s the real problem: the heart of the National government, from John Key repeating Groser’s mantra at Question Time, to Steven Joyce’s blind spot on green business initiatives, simply cannot pay anything other than lip service to the evidence in the IPCC reports, because if they did they would be forced to recognise that they have their policy settings all wrong.

For Tim Groser, climate change is an international relations problem, to be solved by tough negotiation where New Zealand’s interests — as defined by Key & Co — are paramount. For John Key, climate change is a political problem. If the other side thinks it’s important, then by definition his party has to say it’s less important. Such is the nature of parliamentary party politics, as played by shallow people who don’t understand the breadth of the problem they are supposed to confront.

Of course, the climate problem is an international relations issue, and a domestic political issue, but those are just component parts of a far bigger and much more serious problem. The IPCC reports make it clear that we are already changing the climate, and that we’re currently on course for 3 to 4ºC of warming this century — well beyond any safe limit. Action to reduce emissions now will limit future damage, and be surprisingly affordable, but the window to act is closing fast.

What Key & Co do not appear to understand are the dire consequences of inaction. Nor do they appreciate what risk management means when you don’t know how bad things are really going to get. It might be expedient to punt the problem to future parliaments, while trying to save face in the here and now, but inaction is actively increasing the risk of future damage, and the costs of adapting to it. As Susan Krumdieck points out, “there is [...] no way to mitigate the impacts of a catastrophic failure”.

So how do we persuade the present government to take its responsibilities seriously? One obvious route is via the ballot box, by making climate action a central issue in September’s general election and voting for parties with a commitment to urgent action. But there is another way, and one for which there may be some signs of a groundswell developing — and which will be the only route open if the National Party leads the next government.

The Wise Response group has delivered its petition to parliament, calling on the government to take climate action and green growth seriously. The Royal Society of NZ has also called for a change in direction towards a low emissions, green economy. With influential groups consistently knocking on the door, and with climate impacts in the news and increasingly undeniable, is it too much to hope that Key & Co might accept the need for urgent action and set NZ back on the right road?

Last week business lobby group Pure Advantage launched [Herald, Stuff] a specially commissioned report, Green Growth: Opportunities for New Zealand, which presents, they say, “an exhaustive, objective economic argument for embracing green growth”. The report was produced by a London-based economics consultancy in conjunction with the University of Auckland Business School, and is the culmination of two years work to identify the most effective ways of implementing green growth business strategies in NZ.

Launching the report, Pure Advantage (PA) chairman Rob Morrison said:

We firmly believe on the basis of this significant macroeconomic report that New Zealand has the potential to generate billions of dollars in new high-value economic growth, whilst at the same time improving New Zealand’s environmental performance.

Morrison said that PA intends to use the report as “a basis to establish, in consultation with industry, seven industry-specific green growth programmes”. The seven key ‘advantages’ are (links go to PA web explanations):

PA note that the report was “not driven by environmental idealism or fear of climate change”, yet the recommendations look a lot like the sort of joined up thinking on environment and emissions policy that has been so lacking from the present government. By making the business case for green growth, perhaps PA can start a bottom-up change of economic direction that will do for NZ what the government will not. It’s certainly a worthwhile effort, but while there are other lobby groups out there promoting rampant population growth as the way to stop economic decline, it will continue to be an uphill struggle.

Simon Johnson, in his recent Hot Topic post, challenged the failure of Pure Advantage’s report New Zealand’s Position in the Green Race to highlight the importance of putting a price on carbon, and Duncan Stewart offered a robust response. It’s not my purpose in this post to pursue that topic, but rather to dwell on the strong central message of the document — that New Zealand has a much brighter economic future as a green growth economy than as one stuck with the fossil fuel dependance we remain reluctant to address. The report considers government action is necessary to drive the change, but at the same time sadly recognises that the government is currently stuck in a different and inadequate strategy which is hindering advance.

Just how much we are failing to measure up to our proclaimed green image is revealed in the sobering reality check the report performs on various economic fronts.

From the climate change perspective there are a number of serious shortfalls. Our energy supply is heavily reliant on fossil fuels. About 60% of our total energy comes from fuels such as coal, oil and gas. 40% is imported, mostly in the form of oil. And we’re not moving in the right direction. The proportion of energy derived from renewable sources is declining. In 1975 renewable energy accounted for 90% of electricity generation in New Zealand. By 2010, despite recent gains, the figure was down to 76%. Neither Labour nor National-led governments have faced up squarely to the issue.

Our greenhouse gas emissions are the fifth highest per capita in the OECD. Emissions have increased 23% since 1990; most other countries in the OECD managed to reduce per capita emissions. New Zealand will overtake the US in terms of per capita emissions in fewer than eight years. The report recognises that our emissions have a unique profile because of the high relative proportion of emissions from agriculture and doesn’t suggest that mitigation of that source will be easy.

But it’s rightly less sympathetic when it comes to the transport sector:

Between 1990 and 2006, total transport emissions increased by a shocking 64%. About 40% of carbon dioxide emissions come from road transport, equivalent to about 20% of New Zealand’s total greenhouse gas emissions.

New Zealand lags far behind other OECD countries in policies and measures to improve the energy efficiency and emissions reduction of the national transport fleet. Two of the biggest problems are low fuel excise taxes (and low use of road charging to capture external costs more fully) and inadequate public transport infrastructure.

We have one of the lowest user rates of public transport in the world, with only 2.5% of trips made by public transport. Moreover public transport infrastructure funding in New Zealand will be cut from an already low 1.8% of the current land transport budget to 0.7% by 2021.

We’re also laggards on energy efficient housing. New Zealand’s housing stock is notoriously difficult to heat due to poor insulation and the very rare use of double-glazing. Our housing efficiency equates to where the Scandinavians were in the 1960s. We’ve made some progress in that since the building code review new houses now consume 30% less energy than houses built to the old code. But we’re well behind the passivhaus or zero carbon standards adopted by other countries.

Extensive land use change for which we’re paying the cost in the form of higher carbon emissions is another cause for concern. In addition, erosion, nutrient leaching, and loss of biodiversity are all associated with changes in land use. New Zealand forestry is characterised by low levels of new planting.

Issues less directly related to climate change but of crucial importance also figure in the litany of environmental failure. Water is one. The Yale University Water Quality Index ranks New Zealand 43rd out of 132 countries with a score of 40.3 out of 100 for ecosystem vitality for freshwater. High nitrate levels in water have come with the intensification of dairy farming.

On biodiversity issues the report acknowledges some progress on threatened species but notes that 77% of New Zealand’s threatened species still lack targeted recovery work and will most likely continue to decline in numbers due to a lack of resources needed to support protection measures. It considers much more explicit direction is needed.

In the face of all these contradictions of our green image the report explores a number of directions in which green business growth can both remedy some of the deficiencies and open up new profitable directions for the economy which will give better substance to our Pure brand. The list includes bioenergy, energy efficiency in buildings, more sustainable agriculture, geothermal technology, water management technology, liquid biofuel production, smart grid development, well-managed aquaculture, and biodiversity protection. Electric vehicles are also a significant part of the mix, and the report includes this enticement:

New Zealand’s renewable electricity generation has, according to our Energy Efficiency and Conservation Authority, enough spare capacity in the national grid during off-peak times to recharge all New Zealand’s cars if they were to be replaced by electric models. This is a major opportunity to reduce our dependency on imported oil.

But much depends on a strategic willingness by government to induce change. There’s not much sign of that. The Government’s current growth agenda includes a determination to expand the exploitation of natural resources, such as coal and oil. These are largely considered ‘dirty industries’, as they involve unsustainable extraction of finite resources, large scale industrial production and high emissions intensity.

It’s not only environmental issues that arise from this: the economy can be seriously distorted too. One only needs to look at the difficulties that Australia faces. The development of the ‘two-speed’ economy – one based upon dirty commodities and one based upon the rest – has undermined Australia’s value-added manufacturing exports

The tone of the searching questions the report puts to the Government over the growth path it has chosen may be sweetly reasonable, but there’s underlying steel:

Which criteria were used to conclude that further investment in dirty industry is the best long-term strategic outcome for New Zealand? Were these criteria solely economic or did they include purposeful consideration of local, regional and global environmental issues and obligations? Did the economic evaluation include the cost of path dependency and the consideration of the possible need for retrenchment of these industries in future?

Which low carbon or green growth options were considered and on what basis were they excluded?

What is the difference between New Zealand’s ‘must have’ requirement for oil and mineral extraction and the point at which the country is simply exploiting the resource because it is available?

Is the greening of dirty activities sufficient to maintain a 100% Pure status? Is it sufficient for New Zealand to be green at some things but not green at others?

These questions have a business edge but they also bear directly on climate change concern. They expose the short-sightedness of a government complacent even in the face of the fearful consequences of climate change and in spite of the promise that accompanies a green economy. Pure Advantage does well to ask them, but it’s not surprising that their report sees little likelihood of serious government investment in green growth in the foreseeable future, albeit recognising that a few steps have been taken. They place their main hope in the leadership of industry, “as it has the largest financial imperative and the greatest ability to invest”. The most they hope from government is that in due course it may prove willing to follow along, to remove policy roadblocks and provide incentives.

Pure Advantage is focused on galvanising industry. Let’s hope that the green growth strategy that it will be elaborating in subsequent reports succeeds in doing that. Industry may yet put backbone into government.

Duncan Stewart manages the Pure Advantage programme and in this personal guest post addresses Simon Johnson’s criticism earlier this week that the new green growth report, New Zealand’s Position in the Green Race, fails to take carbon emissions reductions as seriously as necessary. Duncan is a director of investment and advisory firm The Greenhouse, an executive director of environmental compliance software company CS-VUE, and a board member of New Zealand’s electric vehicle association APEV.

The report is “good in parts” eh…? Well partly thank you. The headline provides some insight into your analytical approach; focus on carbon and dismiss the other environmental issues. OK, but in doing so you may have missed the point. NZ’s environmental performance is characterised by many different metrics — greenhouse gas emissions are just one of them. It’s certainly an important one, but no one is going to argue that the loss of native biodiversity is less important, or that methane trumps water quality.

These issues are all interconnected and need to be dealt with through a systemic change in the way we value and manage our natural capital.

Will the ETS fix declining water quality? I doubt it.

Will it provide healthier homes for kiwis? Probably not.

Therefore if clean/green New Zealand is an aggregate of a range of environmental performance metrics, it makes sense for Pure Advantage to identify and focus upon all of the key problem areas. The appropriate green growth solutions may be quite different for each, which is why it makes sense to use a cluster model to deliver these (or butterflies emerging from a chrysalis — whatever is easier to understand). Crosscutting issues such as education also need to be applied to address problems collectively.

What the Green Race document has done is highlight multiple performance failures, rather than do what so much of what the historic green debate in NZ has done, which is default to using a single environmental issue as a proxy for a range of environmental issues. The historic approach enables the government to point to a single initiative like the ETS and say, ‘see we care about the environment, we built a shiny new emissions trading scheme’. The fact the ETS doesn’t work is beside the point.

So, Point 1: green growth is bigger than just carbon.

A Market Ornament

“If the NZ ETS is meant to materially alter behaviour in New Zealand by encouraging the development of alternative energy, greater energy efficiency and a significant and demonstrable reduction in emissions, then it is not clear that it will succeed. If, on the other hand, the NZ ETS is meant to be largely symbolic and part of New Zealand’s superficial green branding, then it is largely fulfilling that goal.”

This statement alone makes our position on the performance of the ETS clear. Your argument that Pure Advantage is not being transparent on carbon pricing is unfounded.

Will dialling up the price of carbon and including all sector scheme participants change behaviour? Absolutely.

Will government do this? No.

Will Pure Advantage repeating our ETS position make a difference to government’s lack of willingness to act? No.

But what would happen if Pure Advantage were to encourage industry to take the initiative and change their behaviour in the absence of a strong carbon price (i.e. ‘reality’)?

Well, for one thing you get a win by actually decreasing emissions rather than talking about it, and, secondly, you’ve then got a marketplace which is actually more capable and willing to accept said carbon price and a government that feels more comfortable about dictating that price. I guess this underlines the very practical approach Pure Advantage is taking.

Last week I chaired a meeting in Rotorua, which included key players in the woody mass biofuel and bio-products industries. It was the first time the value chain from forestry, technology, distribution and end use had got in the same room for a korero. Hallelujah they even agreed to play nicely with one another, share information and have a formal workshop with a view to strategy development. Is this example of Pure Advantage practically supporting low-carbon industry coordination an equally valid approach to putting a price on carbon? I argue yes.

Does it need to happen anyway? Yes.

So Point 2: Yes, absolutely put an effective price on carbon. But don’t dismiss the requirement for industry to also develop and coordinate its own solutions, especially as this will further serve to politically de-risk effective pricing.

Answers to your direct questions

Do they recognise the economic point that decarbonising must involve carbon pricing? Yes. Do you realise industry coordination is also part of effective decarbonisation?

Do they accept that the NZETS is an ineffective carbon price scheme? Yes, as publicly stated.

And yes, Pure Advantage is well aware of Hansen’s advice. We helped to arrange and fund his visit to New Zealand. I sat on the steering group that offered The Climate Show an opportunity to interview him. He stayed at my house.

Perhaps Pure Advantage is guilty of not explaining itself clearly enough in the document in relation to the NZ ETS. But there is no shadowy carbon agenda — if you don’t believe me then talk to NZ’s largest environmental watchdogs — it’s no picnic convincing Greenpeace and WWF that a group of business people are genuinely working to address a suite of green issues. Then talk to industry groups like HERA and NERI — they support us too. Even Labour said they would be prepared to work on a bipartisan basis for green growth.

It’s difficult not to become repetitive when blogging about climate change. The basic science is well-established. The dangers global warming poses to human society are clear and in some places present. The solutions lie with drastically cutting the level of greenhouse gas emissions and adapting to changes already unavoidable. The mitigation solution in particular continues to be resisted by vested interests and their political allies. I’m conscious of having expressed each of these facts many times over in a variety of forms over the past three years. And now I’m about to repeat myself within a month of last writing about the contradiction in New Zealand government thinking.

It was BusinessNZ chief executive Phil O’Reilly’s article in the Herald on Tuesday that provoked me. He was bullish at the start of a new year on New Zealand’s opportunity to earn new wealth. It’s our hard commodities – minerals and petroleum —which offer outstanding rewards. We are ’blessed with iron sands, coal, petroleum, phosphate, precious metals and rare earths’. We already take royalties and tax revenues from the sector, and O’Reilly claims we could be earning much more by opening access to more of our mineral and petroleum estate. It needs to be done responsibly of course, and we could be leaders in that direction:

We could create a minerals and petroleum sector with standards for sustainability, safety and environmental protection that are the highest in the world.

From a climate change perspective let’s be clear about what O’Reilly is proposing. He wants the search for and extraction of fossil fuels to play a major part in the New Zealand economy. He’s looking for a great surge in activity in this direction. The high standards of environmental protection he writes of clearly do not include climate protection. This is not surprising. Fossil fuel use is inimical to climate protection. The only way fossil fuels can protect the climate is by remaining in the ground unused. All the care in the world to prevent oil spills or restore mined landscape doesn’t alter the fact that when that fuel is burned it will increase the level of global warming.

O’Reilly urges readers to participate in the review of the Crown Minerals Act which is currently under way and which will invite public consultation this year. I had a look at the Ministry of Economic Development website to see what that involved. There’s nothing there to reassure anyone alarmed by climate change. The first aim of the review:

The Government has set a target for New Zealand to catch up with Australia’s gross domestic product (GDP) per capita (currently 76 per cent) and for exports to be 40 per cent of GDP (currently 31 per cent) by 2025. The Government has announced a broad economic growth plan to achieve this. The plan includes focusing on lifting the growth of particular sectors, including the petroleum and minerals sectors, which have the greatest potential to contribute to a step change in New Zealand’s economic performance and where the potential impact of government action is likely to be very high.

This is all spelt out at greater length in the full discussion document which contains no mention of climate change, global warming, greenhouse gas emissions, or carbon dioxide. In other words the government is determined to go ahead with fossil fuel development as a key factor in their plans for economic growth and no consideration of climate change will be permitted to stop them. Phil O’Reilly, representing New Zealand’s largest business advocacy body, is very much in step.

What is so wrong about all this is not that we are continuing to use fossil fuels. Our economy is built around them and no one is claiming that we can switch off using them immediately. But what one expects from an educated government and business community is a plan to move towards a low-carbon economy with all possible speed and determination, not an all-out drive to discover and exploit fossil fuels justified by the wealth it will create. To do so is morally obtuse since we know the dangers such a course holds for humanity. It is also likely to prove economically self-defeating because it pushes investment in a direction which has dead end written all over it.

O’Reilly does not represent all New Zealand businesses. Phillip Mills of Pure Advantage carried a very different message in the Herald (also posted at HotTopic) in November, urging politicians to plan for a very different future from that extolled by O’Reilly.

Rather than risking our environment and reputation by opening marginally accessible petroleum reserves to foreign oil corporations, the emphasis should be on investing in those industries that can provide us with an advantage in rapidly emerging markets such as renewable energy and the businesses that spin off that, from electric vehicles to cloud computing.

He wrote that the Pure Advantage Trust has recently commissioned a group of world-leading economists to review New Zealand’s green growth opportunities and make recommendations as to how we can build a greener, wealthier nation. They plan to release the group’s findings early this year. Those findings might prove a useful counter to the kind of results the government obviously expects from its review of the Crown Minerals Act.

The task of turning governments worldwide away from fossil fuel exploration and extraction seems herculean. But we have no alternative than to keep at it. It would be dereliction to allow them to carry on regardless with no protest from the portion of the population which understands how truly dire are the circumstances many governments continue to ignore.

I’ll endure the knowledge that I’m repeating myself and say again that the simple fact of the matter is that we can’t extract all our fossil fuel resources without producing severe climate consequences. Exporting them for someone else to burn alters that fact not one whit. The Economic Development Minister Steven Joyce and the Energy and Resources Minister Phil Heatley should be facing up to that reality every day and requiring their cabinet colleagues to do likewise.

Geoff Ross, founder of vodka maker 42 Below, explains the thinking behind the Pure Advantage campaign, launched last week to persuade New Zealand that “green growth” is the best way (some might say the only credible way) for the NZ economy to develop [Herald, Stuff]. Pure Advantage is the brainchild of a group of NZ business leaders, convinced that NZ’s existing reputation as (relatively) clean and green place can be leveraged to give the country an advantage as the world moves to embrace “green growth” — something already worth, they say, $6 trillion a year worldwide.

Pure Advantage grew out of efforts by business leaders to persuade the government to take green growth seriously, and a measure of their success is that this week the Ministry of Economic Development released the first discussion paper (pdf) from the Green Growth Advisory Group created earlier this year. The group’s terms of reference are to help exporters “make the most of a ’clean, green’ New Zealand brand”, encourage “smarter use of technology and innovation”, and help businesses move to a “lower-carbon economy”. It’s a pity there’s not much sign of the latter in other government policy initiatives1 …

…a technological overhaul [...] on the scale of the first industrial revolution. Over the next 40 years, $1.9 trillion per year will be needed for incremental investments in green technologies. At least one-half, or $1.1 trillion per year, of the required investments will need to be made in developing countries to meet their rapidly increasing food and energy demands through the application of green technologies.

If that’s not a market opportunity, I don’t know what is. The report has flown under the radar for most of the world’s media, and I’ve only had time to skim the summary, but it looks like a useful statement of where we are, and where we need to go. More later, perhaps, if I can find the time to do it justice2.

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